As the wealth industry adapts to the proliferation of fintech, wealth managers in Asia Pacific are looking to expand their client base by adding automated investment services.
With the fintech industry growing by leaps and bounds, Finnext Accelerator in Malaysia became the latest Asian program to open its doors for start-ups in September 2016. All wealth managers have to deal with the effects of fintech on their business, and the most disruptive – at least for traditional wealth managers – is arguably robo-advisors. Robo-advisors complement the broader, regulator-driven trend away from product commissions towards fee-for-service or percentage fee models, even in Asia Pacific, where few regulators have banned product commissions outright.
This is not to say that Asian wealth managers are not alive to the threat (and opportunity) posed by the growing ranks of robo-advisors. The proliferation of local robo-advisors such as Bambu (Singapore), Smartly (Singapore), Quantifeed (Hong Kong), Theo (Japan), and 8 Securities (Hong Kong) ensure the robo-advice trend is clear to see. Indeed, 58.3% of Asia Pacific wealth managers we spoke to as part of our 2016 Global Wealth Managers Survey report that their HNW clients are interested in standalone automated investment platforms – well above the global average.
The industry is clearly aware of the threat these low-cost platforms can pose to their business model, particularly given the region’s long affinity for hands-off execution-only asset management over traditional discretionary mandates. But established players aren’t going to take it lying down. A fifth of the Asian wealth managers we surveyed indicated that they are looking to add some form of automated investment platform over the next 12 months, backed up by a widespread feeling in the industry that this can complement an existing wealth management offering, not just compete with it.
In Asia Pacific at least, the rising tide of robo-advisors is not simply going to wash away the existing players. Automated investment services are leading to a split in the market between those that are adapting and using it to grow their service offering and client base, and those that cling to more traditional models. I know which ones I’ll be betting on to succeed.
By Andrew Haslip, Head of Content for Asia Pacific